Don’t get ROAsted for using the wrong KPIs: prioritizing profit

One recurring question among our clients is how to focus and optimize toward a strategy based on profit-driven KPIs.

And the timing couldn’t be better to lay out a simple game plan, because we just finished an incredible training with Google on this very topic.

Why use profit as your key indicator of succcess?
For years, word on the street has been that cost-per-acquisition efficiency was a marketer’s best metric for tracking success. While CPA efficiency does sound like a smart yardstick, especially to a CMO, it’s hard to argue with the evidence that putting paid spend into long-term profitability outcomes is an even better way to go.

Measuring for profitability leads to different insights than measuring for efficiency. It can help you identify missed leads by adopting a growth mindset and keeping your budget flexible. Profits ultimately optimize the trade-off between price and volume.

A framework that covers both high- level and granular business strategy
Prioritizing profit-based KPIs means both the broad and hyper-detailed aspects of your paid media strategy are accounted for, with a clearer picture of areas like attribution and conversions.

The efficiency framework relies on CPA as its core KPI. And while ROAS demonstrates the amount of revenue the received from each dollar spent in Adwords, taking a look at gross profits lets you see how to make your spend go further.

Tips on getting your profit- based KPI strategy in gear
Your first action item when re-prioritizing KPIs should be to meet with your Searchlogic team to discuss your current methods for tracking attribution to make sure they’ll adapt to your new framework.

Here are a few other critical points to cover:

  • Ensure measurements of conversions are complete when factoring them into your profit formula. Be sure that your conversion window is accurate and you are tracking properly.
  • Optimize trade-off between volume and efficiency when calculating maximum profitability.
  • Different parts of the sales funnel should have different goals. Use profit to measure performance campaigns and overall account performance only.
  • Identify the growth potential by: 1) optimizing holistically, 2) adopting a growth mindset, and 3) thinking quarterly.

Your 2018 strategy
If your business and brand isn’t actively optimizing your marketing strategy to focus on profit as the main indicator of success, you are most certainly losing money. But luckily, shifting your KPI priorities can turn things around quickly.

Google’s Account Profit Calculator gives you an organized view of the relationship between the revenue you spend on leads and the resulting gross profit. Custom columns in AdWords also give companies campaign-level profit calculations so they can quickly adapt to profitability patterns. When the data shows that a campaigns is profitable, it’s time to expand targeting and increase investment and bids. And when a campaign is falling short, you’ll be in a position to optimize early and often to set it back on a successful track.

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